WASHINGTON (Reuters) — U.S. hiring
likely snapped back from a three-year low in January and kept the
unemployment rate steady at 6.7 percent, which could ease investors'
fears the economy is slowing sharply.

Nonfarm payrolls are expected to have increased by 185,000 last
month, according to Reuters' poll of economists, after unseasonably
cold weather in December limited gains to 74,000.

"The anticipated acceleration in job growth reflects in part the
unwinding of the weather-induced weakness last month, and is
consistent with other indicators which are pointing to continued
positive momentum in the economy," said Millan Mulraine, deputy
chief economist at TD Securities in New York.

The U.S. Labor Department will release its closely watched
employment report on Friday at 8:30 a.m. (1330 GMT).

A report on Monday showing a surprise drop in factory activity to an
eight-month low in January rattled investors and stoked fears of a
significant cooling off in growth after the economy's robust
performance in the second half of 2013.

With frigid temperatures largely blamed for manufacturing's weak
performance, some economists warned that hiring would probably not
bounce back by as much as many anticipated.

Extremely cold weather and severe winter storms descended on large
parts of the country in January, disrupting activity in
weather-sensitive sectors such as construction.

"While conditions improved for the survey week the rest of the month
was quite cold," said Michelle Meyer, an economist Bank of America
Merrill Lynch in New York.

"In some sectors such as construction, builders may be hesitant to
start new projects given harsh weather conditions, creating delays
in the supply chain."

The report will grab the attention of Federal Reserve officials, who
appeared to shrug off December's weak hiring when they announced
further cuts to their monthly bond purchases at a meeting last
month.

Some economists say a second straight month of weak hiring, even
weather-related, could prompt the Fed to hold off on further
reductions. Economic growth is expected to moderate a bit in the
first quarter, after a spurt in the second half of last year that
was driven by inventories, consumer spending and trade.

Economists estimate that cold weather reduced payrolls in December
by between 50,000 and 100,000.

In its report on Friday, the government will publish revisions to
data on payrolls, the workweek and earnings going back to 2009. Last
year, it said the revisions to this data, which is drawn from a
survey of employers, would likely show that 345,000 more jobs than
previously thought were created in the 12 months through March 2013.

The unemployment rate, which tumbled 0.3 percentage point in
December to its lowest level since October 2008, is expected to have
held steady last month. Economists, however, would not be totally
surprised if it fell gain, given that jobless benefits for more than
one million people expired at the end of December.

"Unemployment would have declined to the extent that people who
lost their benefits either found jobs or left the workforce," said
Peter D'Antonio, an economist at Citigroup in New York.

On the other hand, there is also a chance that the participation
rate, or the proportion of working-age Americans who have a job or
are looking for one, could rebound and lift the unemployment rate.
The participation rate fell 0.2 percentage point to 62.8 percent in
December, returning to the more than 35-year low hit in October.

As is the case each year, the January report will incorporate new
population estimates. This means the employment and labor force
figures that are derived from the government's survey of households
will not be comparable to December.

Hiring in January is expected to have been all in the private
sector, with government payrolls holding steady.

Manufacturing jobs likely rose, although a report on Monday from the
Institute for Supply Management that showed a decline in factory
employment suggested forecasts could be off base.

Employment in the retail sector probably slowed after strong
increases in the prior months.

"We think the year end run-up in retail hiring has run its course,"
said D'Antonio.

Most economists think construction payrolls bounced back from their
weather-depressed December level, although January's relentless cold
may have pushed them down again.

Average hourly earnings, which were held back as the weather reduced
hours for workers, likely rose by 0.2 percent after edging up 0.1
percent in December. The length of the workweek is seen steady at an
average of 34.4 hours.